Pelosi suggests banks that provide loans under a small business program should not be paid more to serve large businesses
As large state-owned companies repay their paycheck protection program loans in the wake of a backlash, House Speaker Nancy Pelosi wonders how the program was put in place.
“We need to look at how the banks are compensated. They get a higher percentage for a small loan, but if you get 5% on a $ 50,000 loan, it’s a lot less than getting 1% on a $ 5 million loan, “the loan said on Monday. California Democrat in an interview with MSNBC, referring to a situation that results in a fee of $ 2,500 versus a situation that results in a fee of $ 50,000.
“Is that correct? Shouldn’t this be a flat rate?” She asked.
The federal government’s new program aims to help small businesses affected by the coronavirus crisis. Banks provide PPP loans and collect a processing fee from the Small Business Administration. Lenders receive 5% for loans of $ 350,000 or less, 3% for loans between $ 350,000 and $ 2 million, and 1% for loans of $ 2 million or more, depending on Treasury Department Directives.
When asked on MSNBC why the government doesn’t just provide the loans, Pelosi brought up the idea that banks could deliver the money faster, and she tried to sound positive about the lenders. .
“It was a decision the Treasury Secretary made to go through the banks for facilitation – that it might be quicker to do than to go through a Small Business Administration process. I do not want the banks to become bad guys in this area, ”the speaker said.
She then added the following: “They are facilitators, and this should be something that we are moving forward with in a very positive way. It’s interesting, however, that they’re making a lot of money out of it – and so that might affect their behavior in all of this. “
Pelosi is not alone in suggesting a fixed fee for every loan to PPP lenders. Aaron Klein, a member of the Brookings Institution who worked in the Treasury Department during the Obama administration, also called on Monday to pay lenders a fixed amount per loan.
“Currently @USTreasury @SBAgov pays lenders 5 times more for a $ 5 million loan than a mid-size loan ($ 200,000). Guess what they produced? Klein tweeted after writing a editorial for Politico on how to fix “broken” rescue program. “Same fees, no incentive for banks / credit unions to prioritize larger loans. ”
He called for other changes to the PPP, such as $ 1 million loan limit after loans over that amount took 44.5% of the program’s first installment of money.
The PPP quickly hit its initial allocation of $ 350 billion that came from the Cares Act of $ 2.2 trillion last month, then got another $ 320 billion on Friday when President Donald Trump enacted the program. $ 484 billion paycheck protection and the Better Health Care Act.
The Small Business Administration resumed accepting P3 loan applications on Monday morning.
Small businesses have reported widespread problems obtaining loans over the past month. Meanwhile, more than 100 state-owned companies have revealed they got the help, though many are returning the money after an outcry and a May 7 deadline from the Treasury Department for returns.
Related:3 listed hotel companies will not pay back small business relief loans
“It is possible that Congress is considering appropriating a third round of PPP funding, which would impact negotiations on a Phase Four bill,” KBW Brian Gardner said in a note Monday, referring to the Washington’s next aid plan.
Democratic lawmakers calling for more help from state and local governments “would get additional leverage to push for state funding if Republicans want more funding for P3 loans,” Gardner said.
See:Next coronavirus aid package may not pass Congress until June as battle lines harden
US DJIA equities,
Are trading well below their February highs amid coronavirus concerns, but they have recovered from their recent lows in late March thanks in part to optimism surrounding Washington’s aid efforts. The S&P 500 and Dow Jones gained on Monday, with analysts blaming some easing.